November 22, 2021

Human Capital: Assessing a Year’s Worth of Disclosure

The rules requiring principles-based disclosure of material information about human capital management practices have been in place for a little over a year now, and this Gibson Dunn memo takes a look at what companies have been saying in response to the requirement. The firm surveyed 10-K filings from 451 members of the S&P 500, and found that disclosure practices varied pretty widely, “with no uniformity in their depth and breadth.” That makes disclosures difficult to compare, which is one reason why more prescriptive disclosure requirements are likely on the way.

Despite the challenges, the firm was able to group common areas of disclosure within a handful of categories: workforce composition and demographics; recruiting, training & succession; employee compensation; health & safety; culture & engagement; COVID-19; and HCM governance & organizational practices. This excerpt discusses diversity and inclusion disclosure practices, which was the most common type of workforce composition disclosure:

This was the most common type of disclosure, with 82% of companies including a qualitative discussion regarding the company’s commitment to diversity, equity, and inclusion. The depth of these disclosures varied, ranging from generic statements expressing the company’s support of diversity in the workforce to detailed examples of actions taken to support underrepresented groups and increase the diversity of the company’s workforce. Many companies also included a quantitative breakdown of the gender or racial representation of the company’s workforce: 41% included statistics on gender and 35% included statistics on race.

Most companies provided these statistics in relation to their workforce as a whole, while a subset (21%) included separate statistics for different classes of employees (e.g., managerial, vice president and above, etc.) and/or for their boards of directors. Some companies also included numerical goals for gender or racial representation—either in terms of overall representation, promotions, or hiring—even if they did not provide current workforce diversity statistics.

In addition to discussing the types of disclosures that companies made, the memo also looks at disclosure practices within specific industries, including finance, tech, manufacturing, travel, retail and others. It also looks at how companies formatted their disclosures, the comments the Staff provided, and makes some recommendations for actions companies should take going forward.

John Jenkins